Currency rhetoric heats up with New Zealand joining warnings

New Zealand’s central bank governor said he’s ready to intervene in foreign-exchange markets, adding to comments by officials from South Korea to South America warning their currencies are too strong, even as Group-of-20 nations say they’ll refrain from competitive devaluation.

The New Zealand dollar fell against its 16 major peers after Reserve Bank Governor Graeme Wheeler said “the kiwi is not a one-way bet.” After Japan’s leaders pledged steps to boost the economy that caused the yen to tumble, policy makers in South Korea and the Philippines are weighing curbs to capital inflows, while Norway’s central bank said it is ready to cut interest rates to counter the krone’s strength.

While European Central Bank President Mario Draghi said two days ago that finance chiefs should exercise prudence when talking about foreign-exchange movements, Wheeler said in a speech to manufacturers and exporters today in Auckland that he’s “prepared to intervene to influence the kiwi.” The New Zealand dollar slid 1.2% to 83.63 U.S. cents at 1:16 p.m. in New York. The country isn’t a member of the G-20.

“There seems to be a sense that the gloves are off in terms of central-bank action in currency markets,” said Mitul Kotecha, global head of foreign-exchange strategy at Credit Agricole SA in Hong Kong. “Wheeler’s comments are a clear reflection of the G-20 stance, wherein the green light appears to be given to any central bank that wants to intervene in the currency as long as they don’t talk about particular levels.”

Kiwi’s Gain

The kiwi has surged almost 45% against the dollar since the end of 2008, the biggest advance after its Australian counterpart among over 150 currencies tracked by Bloomberg. It strengthened to 88.43 U.S. cents on Aug. 1, 2011, the highest level since it was freely-floated in 1985.

Finance ministers and central bankers from G-20 nations pledged in a Feb. 16 statement not “to target our exchange rates for competitive purposes,” while refraining from singling out Japan for weakening its currency.

Since Japan’s Shinzo Abe called for unlimited money printing by the central bank when he was opposition leader on Nov. 15, the yen has slid 13% against the dollar, the biggest decline among major currencies. Elections the following month elevated him to prime minister.